Dirtt Environmental Solutions Ltd · TSX:DRT
Dirtt Environmental Solutions — Investor Day (November 2019)
23 slides from Dirtt Environmental Solutions's investor day presentation, Nov 12, 2019
Slide 1: Analyst Day November 12, 2019
Analyst Day November 12, 2019 TSX: DRT NASDAQ: DRTT
Slide 2: Cautionary Statement Regarding Forward-Looking Statements
Advisory CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Certain statements contained in this Investor Presentation (“Presentation”) are “forward-looking statements” within the meaning of “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, and Se
Slide 3: Non-GAAP Financial Measures
Non-GAAP Financial Measures Our consolidated financial statements are prepared in accordance with GAAP. These GAAP financial statements include non-cash charges and other charges and benefits that we believe are unusual or infrequent in nature or that we believe may make comparisons to our prior or
Slide 4: Financial - Geoff Krause, CFO
Financial Geoff Krause, CFO
Slide 5: Overview
FINANCIAL Overview A guided tour through DIRTT’s financials The path to our 2023 financial targets Capital requirements Approach to capital allocation 5
Slide 6: Historical Financial Performance
FINANCIAL Historical Financial Performance (US$mm) 2016 2017 2018 Revenue 201.3 226.5 274.7 Cost of goods sold 122.2 141.0 167.7 Gross profit 79.1 85.5 107.0 Sales & marketing 35.1 46.4 40.7 General & administrative 23.0 29.4 30.9 Operational support 8.2 8.2 9.0 Technology & development 5.8 6.9 4.7
Slide 7: Form 10-Q Presentation (SBC) Sept. 30, 2019
FINANCIAL Form 10-Q Presentation (SBC) Sept. 30, 2019 (US$mm) 2016 2017 2018 TTM Revenue 201.3 226.5 274.7 269.0 Cost of goods sold 122.2 141.0 167.7 168.3 Gross profit 79.1 85.5 107.0 100.7 Sales & marketing1 34.9 46.2 40.6 36.3 General & administrative1 22.0 28.4 28.7 28.1 Operations support1 7.3
Slide 8: Adjusted Gross Profit
FINANCIAL Adjusted Gross Profit Sept. 30, 2019 ($mm) 2016 2017 2018 TTM Gross profit 79.1 85.5 107.0 100.7 Gross profit margin 39.3% 37.7% 39.0% 37.4% Add: Depreciation and amortization 7.3 8.7 9.5 9.4 Adjusted Gross Profit1 86.4 94.2 116.5 110.1 Adjusted Gross Profit Margin1 42.9% 41.6% 42.4% 40.9%
Slide 9: Components of COGS excl. Depreciation and Amortization
FINANCIAL Components of COGS excl. Depreciation and Amortization1 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Strategic sourcing Material yield Reduced rework Standardized work Automation Increased productivity Reduced rework Leverage from unlocked capacity $158.9 mm TTM Sept. 30, 2019 Direct Materi
Slide 10: Components of Net Operating Costs
FINANCIAL Components of Net Operating Costs2 Sept. 30, 2019 ($mm) 2016 2017 2018 TTM Sales & marketing1 34.9 46.2 40.6 36.3 General & administrative1 22.0 28.4 28.7 28.1 Operations support1 7.3 7.2 8.1 10.0 Technology & development1 5.3 6.4 4.2 7.1 Total 69.5 88.2 81.6 81.5 % of revenue 34.5% 38.9%
Slide 11: Historical Operating Performance
FINANCIAL Historical Operating Performance Sept. 30, 2019 (US$mm) 2017 2018 TTM Net income (7.7) 5.5 6.3 Add back: Depreciation 12.9 13.7 12.7 Net interest expense (income) 0.1 0.1 (0.1) Income taxes 0.4 3.3 3.8 EBITDA1 5.7 22.6 22.7 Add back: Stock based compensation 2.7 3.7 2.9 FX on debt revaluat
Slide 12: Balance Sheet Strength
FINANCIAL Balance Sheet Strength Sept. 30, ($mm) 2018 2019 Cash and cash equivalents 53.4 56.6 Accounts receivable 43.9 27.5 Inventory 18.7 19.0 Prepaids and other 2.2 4.3 Total current assets 118.2 107.4 Fixed assets and capitalized software 45.0 46.6 Right of use assets—21.5 Deferred tax assets 6.
Slide 13: Our Strategy at a Glance: Financial Targets
OUR STRATEGY AT A GLANCE Financial Targets* Our expectation is that actual sales growth will vary by year due to the project nature of our business Revenue US $ Million $600 $500 $400 $300 $200 $100 $0 TTM Q4/18—Q3/19 FY 2023 2023 Revenue $450M—$550M Adjusted EBITDA Margin 25% 20% 15% 10% 5% 0% TTM
Slide 14: The Path to 2023 Target
FINANCIAL The Path to 2023 Target 100% 80% 60% 40% 20% 0% 16% 28% 58% 2018 12% 29% 59% Sept 2019 TTM COGS excl. Depreciation & Amortization1 -20% Margin expansion Elimination of $5.5 mm of one time costs in 2019 combined with leverage from G&A and T&D. Investments in sales and marketing at same rate
Slide 15: Upside Exists in Plant Operations
FINANCIAL Upside Exists in Plant Operations (Adjusted COGS1) 60% 50% 40% 30% 20% 10% 0% 59% Direct Materials, 29% Other Direct, 8% Direct Labor, 7% Indirect/OH Labor, 8% Other Overheads, 7% Historical Assumed no change in direct materials with upside available from implementation of strategic sourci
Slide 16: Investments in Sales and Marketing
FINANCIAL Investments in Sales and Marketing Sales & Marketing Headcount vs % of Revenue 200 180 160 140 120 100 80 60 40 20 Dec-18 Aug-19 2020 2021 2022 2023 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Headcount Target S&M% of revenue Investment in sales and marketing headcount
Slide 17: Capital Investments
FINANCIAL Capital Investments $18-$20 million Ongoing Capital Expenditures 35% 35% 12% 18% Plant Equipment Corporate GLC refresh Software development Estimated major capital initiatives 2019-2021 (approx.) over and above ongoing capital expenditures: Initiative 2019 2020 2021 Primer line 2.0 Charlot
Slide 18: DIRTT Experience Centers - DXC Rebranded from GLC
FINANCIAL DIRTT Experience Centers—DXC Rebranded from GLC DXCs key to driving sales in key markets, outfitted with representative offerings for respective target verticals in their regions 18
Slide 19: Cashflow and Capital Allocation
FINANCIAL Cashflow and Capital Allocation We expect DIRTT to be a free cash flow generating business High conversion of Adjusted EBITDA to Cashflow from Ops (60-70%) with low capex requirements. Current capital structure is intentionally conservative based on the transformational nature of the execu
Slide 20: Appendix
Appendix
Slide 21: New Stock Based Comp Presentation
APPENDIX New Stock Based Comp Presentation Less: 9 Sept. 30, 9 months months Sept. 30, 2019 ended Sept. ended Sept. 2019 ($mm) 2016 2017 2018 TTM 30, 2019 Plus: 2018 30, 2018 TTM Sales & marketing per Form 10/10Q 35.1 46.4 40.7 36.2 25.9 40.6 30.3 36.2 Less: Stock based compensation 0.2 0.2 0.1 — ——
Slide 22: Calculation of TTM Sept 30, 2019
APPENDIX Calculation of TTM Sept 30. 2019 Less: 9 9 months months Sept. 30, ended Sept. ended Sept. 2019 (US$mm) 30, 2019 Plus: 2018 30, 2018 TTM Revenue 194.5 274.7 200.2 269.0 Cost of goods sold 121.5 167.7 120.9 168.3 Gross profit 73.0 107.0 79.3 100.7 Sales & marketing 25.9 40.6 30.2 36.3 Genera
Slide 23: Calculation of TTM Sept 30, 2019 (EBITDA)
APPENDIX Calculation of TTM Sept 30. 2019 Less: 9 9 months months Sept. 30, ended Sept. ended Sept. 2019 (US$mm) 30, 2019 Plus: 2018 30, 2018 TTM Net income 3.2 5.5 2.4 6.3 Add back: Depreciation 9.3 13.7 10.3 12.7 Net interest expense (income) (0.2) 0.1—(0.1) Income taxes 3.6 3.3 3.1 3.8 EBITDA1 15
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